Mid-day fade trades Part II

Here's part 2 of the mid-day fade trade: (see part I here)

- The trade did not work, but it gave me 2 important piece of information that provided me an edge for a breakout trade later in the day. (love paying little for information!)

Trade 2: LVS - 8/12/10

-30 min chart showing levels to watch are 28, 28.07 (resistance) and 28.40 (gap fill)

- 5 min chart showing 3 push pattern into resistance mid-day

- rallies are needing more time to rest

- after entry, stock was getting well bid around 27.75... did not drop together with market and showing relative strength intraday

- stopped out 27.88 on a lowered stop as stock is holding 20EMA (-1c)

- the trade was busted, but it gave me 2 pieces of information

- LVS was a leader intraday showing relative strength and has become candidate for breakout for eod push

- LVS has bids at 27.75

I kept tracking LVS, it made another move over 28, but stopped at 28.07 resistance around 1pm. Since its still mid-day and market was not trending, it did not fit my criteria for buying a breakout.

Then 2:55pm comes around (into eod where breakout trades have a higher probability of working), market was firming up, LVS pushed through 28.07. I bought the breakout at 28.08 w/ stop at 20ema and target of 28.40. (see chart below for details)

If anyone is reading this, let me know your thoughts on this trade.

-Chris

Mid-day fade trades Part I

Today I tested 2 what I call "mid-day fade trade". The current "mid-day fade trade" criteria (constantly refining) are:

Trade type: Intraday scalp

Thesis:

1. stocks get push into resistance early in the session has a lower probability to break out in the mid-day slow choppy trading environment
2. some stocks can be faded at resistance level when buyer failed to lift stock above important resistance level
3. looking to profit from trapped momentum-based bulls losing patience and exiting their positions

Setup:

1. stock must make a sizable non-news driven rally from the open and run into resistance in a 30min/ daily time frame
2. Time of day - rally into 10:30am to 1:30pm
3. Non-trending day - market did not just take out major level, prefer emotional larger candles in the indices on the intraday 5min charts, tick and a/d are mixed
4. looking for 3-push patterns with declining volume and increased frequency (stock needs to breathe more frequently)

Entry/ Stop/ Target:

1. enter on 2B reversals/ failed breakout from resistance levels on 5 min charts
2. price stop: above high of day
3. time stop: 3pm if its not working
4. target - vwap (1st target)/ opening price/ prior intraday support
5. risk/reward is >2x

Other thoughts:
- prefer stock in downtrend on daily chart


Trade 1: NUE - 8/12/2010

- 30min chart showing 38.75 as resistance


- 5min chart showing 3-push pattern, breaking intraday uptrend line mid-day
- stock moved quickly to test vwap and prior support


comments: need to add as trendline is broken

Part II will cover a failed mid-day fade trade that gave important information on the stock I was trading.